Managerial Accounting Ch 6 Presentation

Which of the following statements about the segment margin is not true?

The segment margin is obtained by deducting the common fixed costs that have been allocated to a segment from that segment's contribution margin.

The difference between absorption costing net operating income and variable costing net operating income can be explained by the way these two methods account for

fixed overhead costs

When the units produced are equal to the units sold, the net operating income computed using the variable costing method is _____ the net operating income using the absorption costing method.

is equal to

When the units produced are less than the units sold, the net operating income computed using the variable costing method is _____ the net operating income using the absorption costing method.

is greater than

When the units produced exceed the units sold, the net operating income computed using the variable costing method is _____ the net operating income using the absorption costing method.

is less than

When the number of units produced is greater than the number of units sold, variable costing net operating income will be

less than absorption costing net operating income

Which of the following costing approaches is best suited for cost-volume-profit analysis?

variable

Absorption costing income statements ignore

variable and fixed cost distinctions

What is the cost of goods sold for the month of January using the absorption costing method?

COGS = total cost per unit x units sold total cost per unit = dm + dl + vmo + fmo fmo = 10,000 / 500 = 20 30 + 20 + 10 + 20 = 80 80 x 400 = 32,000

If the company eliminates the Western Division and the Eastern Division sales increase by 10% as a result, how much will the company's net operating income decrease?

$83,700

What is the company's contribution margin for January?

$13,200 CM = Sales Revenue - variable production expenses - variable selling and administrative expenses Sales Revenue = Sales price per unit x units sold 100 x 400 = 40,000 Unit product cost = Direct materials + Direct labor + Variable manufacturing overhead 30 + 20 + 10 = 60 Variable cost of goods sold = 60 x 400 = 24,000 Variable expenses = per unit 7x400 units = 2800 24,000 + 2800 = 26,800 40,000 - 26,800 = 13,200

Max, Incorporated, has two divisions, South Division and North Division. South Division's sales, contribution margin ratio, and traceable fixed expenses are $500,000, 60%, and $100,000, respectively. What is the segment margin for the South Division?

$200,000

Bovine Corporation has two divisions: televisions and mobile phones. The mobile phone division has a contribution margin of $600,000. The company's common fixed costs and total traceable fixed costs are $100,000 and $500,000 respectively. Assuming the traceable fixed costs of the television division are $300,000, what is the segment margin of the mobile phone division?

$400,000 The traceable fixed costs of the mobile phone division is ($500,000 total traceable fixed costs - $300,000 traceable fixed costs of television division) = 200,000 segment margin is ($600,000 contribution margin - the $200,000 traceable fixed costs) = 400,000

What is the break-even point for the International Division?

$440,000 640,000 / 800,000 = 0.8 352,000 / 0.8 = 440,000

Assuming the variable costing method is used, what is the total manufacturing costs added to work in process during the month of February?

$52,000 Direct materials used in production 40,000 + Direct labor 10,000 + Variable manufacturing overhead 2,000 = 52,000

What is the break-even point for the American Division?

$600,000 432,000 CM / 720,000 sales = 0.6 fixed expenses 360,000 / 0.6 = 600,000

Assuming the absorption costing method is used, what is the total manufacturing costs per unit added to work in process during the month of February?

$92,000 fixed manufacturing overhead / units produced 120,000 / 3 = 40,000 40,000 + Direct materials 40,000 + Direct labor 10,000 + Variable manufacturing overhead 2,000 = 92,000

Decide how each cost is treated on an income statement prepared using the variable costing approach. Using the dropdown boxes, indicate whether each cost item is treated as a period cost or product cost.

1. Direct labor: Product cost 2. Fixed manufacturing overhead: Period cost 3. Variable manufacturing overhead: Product 4. Fixed selling and administrative expenses: Period 5. Variable selling and administrative expenses: Period

Which of the following is a common mistake made by companies when assigning costs to segments?

They assign the costs of the corporate headquarters buildings to segments because the segments must cover those costs.